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DoD Campaign to Improve Financial Readiness

WASHINGTON, June 3, 2003  The Defense Department has begun an education and awareness campaign to help military personnel deal with personal financial problems.

This comes after studies by DoD and private researchers show that personal money woes have become a growing problem that can impact military readiness.

Undersecretary of Defense for Personnel and Readiness David S.C. Chu announced the start of the Financial Readiness Campaign in May. DoD took the action to help military personnel and their families learn more about financial responsibility and to encourage military families to better manage their finances.

According to Army Col. Marcus Beauregard, director for morale, welfare and recreation policy for DoD, the campaign will focus on five strategies. One will be marketing the importance of good financial management habits to junior enlisted personnel and their families.

The other campaign strategies are getting military leadership involved, making improvements in education and training programs, using partners to assist in those programs and evaluating the campaign frequently to make it better in the future.

"Basically, our objective is to reduce the stress that people feel as a result of financial problems," Beauregard said, "and to do that through awareness, do that by helping them get out of debt, start saving and to prevent them from being preyed upon by predatory practices."

Twenty-six federal and nonprofit agencies have agreed to assist DoD in the campaign. They have offered financial counseling, training and education materials available to military support organizations and military families with financial difficulties.

"Our vision for the program is to create a culture where people feel comfortable talking about their financial well- being and feel comfortable about getting help if they need that help," Beauregard noted.

"Right now we don't see that in the department. ... If someone has a problem, they are more likely to try to solve it themselves or basically cover it until it just becomes too big an issue and they have to find someone to help. Usually at that point it's too late. So the vision is to make people value the importance of personal financial well-being and financial ability.

The Financial Readiness Campaign is a result of a study presented to Congress May 31, entitled the "Report on Personal and Family Financial Management Programs," which indicated that financial problems by military personnel and their families have an impact on readiness and productivity.

DoD and contractor Rand Corporation's National Defense Research Institute compiled the report. It noted that financial difficulties can have significant mission impact, such as requiring an individual to return from a deployment to address a financial emergency. This can be stressful and costly for the individual and the unit, the report stated.

NDRI researchers also reported that commanders see poor personal financial management as the main problem facing junior enlisted personnel and their families. The report acknowledged that unit leaders spend much of their time dealing with military personnel who have financial problems.

Poor personal financial management, for example, costs the Navy $250 million annually in productivity and salary losses, Beauregard cited from another survey conducted for the Navy in 2000.

The Navy also stated that 78 percent of commanders surveyed reported using up to 25 percent of their time addressing financial issues.

In addition, individual surveys, studies and reports by the services, conducted between November 2001 and December 2002, indicated that 25 percent to 35 percent of junior enlisted had problems paying bills or experienced at least moderate financial difficulty.

An Air Force survey on personnel financial readiness showed that pay grades E-3 through E-5, which comprise 50 percent of the force, applied for 78 percent of the assistance provided by the Air Force Aid Society. This same group also received 76 percent of the nonjudicial punishment for indebtedness issues.

And DoD's May 31 report indicated E-1s through E-6s have the most difficult time making ends meet. It attributes lower-enlisted service members' trouble in paying their bills to poor financial education and spending habits rather than from their level of income. The report said that low levels of savings and poor use of credit are common and create long-term personal financial management problems.

For example, in the NDRI study the Air Force reported new recruits carrying an average of $6,000 debt -- 50 percent for car loans and the rest in student loans and credit card bills.

Fifty-three percent of Air Force E-3s through E-5s were paying off non-car/house loans that were over two years old, and 39 percent were carrying a balance for more than a month on three or more credit cards.

The NDRI study reported 18 percent of Navy enlisted members were delinquent on credit card payments, and credit card debts were the main reason for Army enlisted personnel financial problems.

"The biggest problem military personnel make is that they are living beyond their income," Beauregard explained. "It doesn't happen all at once, it happens incrementally."

"People start seeing things they want, they'll put money towards it, they'll start stretching those payments out, they'll use credit -- there's a lot of problems with the use of credit. And then those things start to mount up to where their discretionary income becomes very small," Beauregard said.

"And then if they have anything that occurs where they really need to have that money, then they are dependent upon credit or financing something and that gets them further into that debt line rather than having a balanced financial approach. ... They tend not to plan, they tend to just let these things accumulate and then they get overwhelmed."

In addition, the DoD report said that a "disproportionately low number" of junior enlisted personnel have established savings for emergencies and large purchases in the future.

The Army reported that 55.8 percent of enlisted members have less than two weeks of emergency savings. Twenty-four percent of respondents to the Air Force's financial assessment survey of E-3s through E-5s said they had no savings, and 29 percent said they had less than $1,000 in savings. The Navy reported 54 percent of its junior sailors as having less than $1,000 in savings.

"If you talk to any financial educator, they'll say that the No.1 thing that people need to do is to just have a very simple plan that they can live by," Beauregard emphasized.

"And that's just a way of making sure that they put a little bit aside, some people call it paying your self first. The rest is just making sure you stay within your level of income to pay all your bills."